Nielsen Holdings PLC Valuation – June 2018 $NLSN

Company Profile (excerpt from Reuters): Nielsen Holdings plc, incorporated on February 4, 2015, is a performance management company. The Company provides to clients an understanding of what consumers watch and what they buy and how those choices intersect. The Company’s segments include what consumers buy (Buy), consisting principally of market research information and analytical services, and what consumers watch and listen to (Watch), consisting principally of television, radio, online and mobile audience and advertising measurement services and corresponding analytics.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of NLSN – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,032,301,400 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.23 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -471.82% Fail
6. Moderate PEmg Ratio PEmg < 20 22.12 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.43 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 19.50 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.37
MG Growth Estimate 4.35%
MG Value $23.56
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $19.87
MG Value based on 0% Growth $11.65
Market Implied Growth Rate 6.81%
Current Price $30.31
% of Intrinsic Value 128.62%

Nielsen Holdings PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.06 in 2014 to an estimated $1.37 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.81% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Nielsen Holdings PLC revealed the company was trading above its Graham Number of $20.06. The company pays a dividend of $1.33 per share, for a yield of 4.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 22.12, which was above the industry average of 18.83. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.55.

Nielsen Holdings PLC scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$28.55
Graham Number $20.06
PEmg 22.12
Current Ratio 1.23
PB Ratio 2.43
Current Dividend $1.33
Dividend Yield 4.39%
Number of Consecutive Years of Dividend Growth 5

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $2,264,000,000
Total Current Liabilities $1,839,000,000
Long-Term Debt $8,286,000,000
Total Assets $16,923,000,000
Intangible Assets $13,606,000,000
Total Liabilities $12,465,000,000
Shares Outstanding (Diluted Average) 357,274,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.50
Dec2017 $1.20
Dec2016 $1.39
Dec2015 $1.54
Dec2014 $1.00
Dec2013 $1.94
Dec2012 $0.75
Dec2011 $0.23
Dec2010 $0.46
Dec2009 -$1.79
Dec2008 -$2.61

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.37
Dec2017 $1.34
Dec2016 $1.38
Dec2015 $1.28
Dec2014 $1.06
Dec2013 $0.83
Dec2012 -$0.01
Dec2011 -$0.51
Dec2010 -$0.85
Dec2009 -$1.29
Dec2008 -$0.87

Recommended Reading:

Other ModernGraham posts about the company

10 Best Stocks for Value Investors This Week – 7/22/17
Nielsen N.V. Ordinary Shares Valuation – July 2017 $NLSN
Nielsen NV Valuation – August 2016 $NLSN
Nielsen NV Analysis – July 2015 Update $NLSN
17 Companies in the Spotlight This Week – 7/19/14

Other ModernGraham posts about related companies

Interpublic Group of Companies Inc Valuation – April 2018 $IPG
Omnicom Group Inc Valuation – April 2018 $OMC
Nielsen N.V. Ordinary Shares Valuation – July 2017 $NLSN
Lamar Advertising Company Valuation – Initial Coverage $LAMR
Interpublic Group of Companies Inc Valuation – December 2016 $IPG
Nielsen NV Valuation – August 2016 $NLSN
Interpublic Group of Companies Inc Valuation – August 2016 $IPG
Omnicon Group Inc Valuation – July 2016 $OMC
Nielsen NV Analysis – July 2015 Update $NLSN
Interpublic Group of Companies Inc. Annual Valuation – 2015 $IPG

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.


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